[ExI] Yet another health care debate

Stathis Papaioannou stathisp at gmail.com
Tue Sep 23 13:25:13 UTC 2008

(Declaring my interest: I am a doctor working in the Australian public
hospital system).

Health care in Australia is about 70% Government funded, but much of
this money is paid to private practitioners. Patients are free to see
any doctor they want, and the doctor is free to charge them whatever
they want to charge, but there is a fixed amount that Medicare will
pay the doctor according to the service offered. Pathology and
radiology are covered, and there is limited funding for some other
services such as psychology and optometry, but for the most part not
dentistry. Some years ago it used to be that most doctors charged
patients only the Medicare rebate amount, but that has changed and
most doctors now charge the Medicare rebate amount only for the
financially disadvantaged, and on average 15-30% more than this amount
for everyone else. In part this has been driven by increased demand
for doctors which is not being met by increasing doctor numbers,
because the medical organisations themselves control their numbers and
will not allow the Government to train or import more doctors claiming
that this will result in a drop in standards.

Most medication dispensed in Australia is subsidised by the
Pharmaceutical Benefits Scheme. To get on the list of subsidised
medications, a drug company has to argue that their product is
effective and negotiate an Australia-wide price for it. Drug companies
hate this because as one of the single largest drug buyers in the
world the PBS has a lot of bargaining power. The PBS committee
considers both medical and economic efficacy. For example, a drug that
is expensive and demonstrably only marginally effective might still be
listed on the grounds that even if reduces the need for
hospitalisation by an average of a few days it would still result in a
saving. Drugs that are PBS listed are subsidised so that, whatever
their actual cost, a pensioner pays a maximum of about $5 and a
non-pensioner pays a maximum of about $30 for a month's supply. These
drugs are dispensed through private pharmacies. Drugs not on the list
can still be sold at the full cost, but in practice, demonstrably
effective drugs generally make it onto the PBS within a few months of
becoming available due to lobbying from medical and patient groups,
and very expensive or experimental drugs are provided to selected
patients by public hospitals out of their own budget.

The public hospital system is completely free for every citizen,
including those who have private health insurance. Private hospitals
also exist, but in general they are smaller, less prestigious, and
concentrate on elective procedures with the expectation of short
admission times and low risk of complications. Medicare/PBS will pay
for the doctors and drugs in private hospitals, but not for anything
else, so most people who use private hospitals have private health
insurance. There are tax incentives for high income earners to take
out private insurance, but often the privately insured will still end
up being treated in a public hospital because their insurance won't
cover the full cost or won't cover them for a prolonged admission if
they have complications.

Public hospitals are generally funded to service a certain
geographical region, although they can gain or lose funding depending
on actual patient numbers and complexity. Large city public hospitals
also take referrals from rural areas, and sometimes from other public
hospitals where they have a special expertise in a particular area.
Each hospital has a lot of autonomy in how they manage their budget,
but is required to keep statistics on such things as number of
admissions, what type of cases are admitted, admission lengths,
complication rates, waiting lists for elective surgery, waiting times
for people to be seen in emergency departments, and so on. They are
ultimately answerable to the central state authority, and if they are
found wanting in efficiency or effectiveness compared to other similar
hospitals, public or private, management is liable to be sacked and
replaced. There has been a trend in recent years to appoint CEO's paid
at the rates common in a private corporations of a comparable size
(i.e. much more than the people who do the actual work), resulting in
the "corporatisation" of public hospitals and the outsourcing of
services such as cleaning, similar to what was described by Tom Nowell
for the UK. I was sceptical about this on principle, but it does not
seem to have made anything worse, and waiting lists for things such as
elective surgery have fallen in recent years, such that for most
things it is now no faster in Victoria to wait for a private bed.

What annoys me most about working in the system is being forced to
collect statistics and do paperwork in a certain standardised
(arse-covering) way when I can't see how it will personally benefit
the patients I look after. If we didn't have to do this, there would
be more time for clinical work, or perhaps a saving in money spent on
clinical and administrative staff. On the other hand, the Australian
system results in outcomes comparable to those in the US for half the
cost, so it can't all be all that inefficient.

Stathis Papaioannou

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